NGOImpact

Corporates to Open Purse Strings for Development

The new CSR law under Section 135 of the amended Companies Act, 2013 has changed the face of corporate-NGO partnerships in India. The new Law, which came into effect in April 2014, has imposed for the first time in history, social responsibility obligations on all Indian companies and foreign companies doing business in India. All parties directly or indirectly involved in this sector are still in the process of accommodating the changes that have accompanied this landmark decision by the Indian parliament. The mandatory ‘comply or explain’ guidelines are actively reshaping the relationship between corporates and Indian NGOs.

Companies that fall within the ambit of the new Law are required to spend at least 2% of their net profit (average of the previous 3 years) on any of the CSR activities recommended in the guidelines. The rules regarding the law further emphasises the role of ‘implementing agencies’, implying that companies are not required to undertake these activities by themselves but rather approach it as a shared civic responsibility. Apart from the large, well-established Indian corporates, a large portion of the companies that meet the requirements of the Law have minimal experience in finding and executing CSR activities. Therefore, most of them will not only require implementation support but also assistance with finding/identifying, verifying and monitoring their NGO partners and projects.

The vast number of NGOs operating within India will undoubtedly play a crucial role in the successful implementation of this Law. The exact number of NGOs based in India is currently unknown owing to the fact that many of them remain either unregistered or are alternatively registered as trusts or societies. Attempts at quantification put the number around 3.3 million. These NGOs have contributed significantly to the development of human rights, education, sanitation, sustainable development, child rights, etc. within the country.

The obligation introduced by the Act has encouraged many companies to actively establish ties with NGOs as their experience with and knowledge of the needs and demands of the Indian citizenry is unmatched, perhaps even by the government. This is slowly changing the nature of the relationship between companies and NGOs, which has historically been one of mutual wariness. The Law has already led to a gradual decrease in the trust deficit between these two key parties. Bhaskar Chatterjee, director general and chief executive officer of the Indian Institute of Corporate Affairs (IICA) says, “The new legislation will lead to a synergistic partnership between corporations, NGOs and the government which would also allow for greater transparency in the operations of all three agencies”.

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The examples of Corporate-NGO partnerships worldwide exhibit how fruitful this relationship can be. The collaboration between US-based Rainforest Alliance and the US-based corporation Chiquita Brands led the company to become more sustainable in its operations, particularly the production of bananas. The alliance between Bosch India and Akshara Foundation is another example of a successful NGO-Corporate relationship. Other corporates such as Godrej, Yes Bank, Colgate, Jubilant, Cairn etc. have been partnering with various NGOs on a variety of targeted projects to address social inequalities and contribute to development. This availability of funds in the Indian CSR sector is likely to result in an increased focus on quality, outcomes and improved performance. While companies look for alliances, NGOs are rolling up their sleeves. As both of these players have often been historically viewed as occupying opposite ends of the spectrum, they recognise the importance of adopting transparency in a situation that requires accountability.

The new CSR law urges companies to focus their CSR activities in local areas and places where their offices/manufacturing units operate. This is intended to inspire companies to seek NGOs that are located in remote areas and will thus help smaller players in acquiring funding. The CSR sector has also seen an emergence of intermediaries that assist companies in selecting the right partners. These independent bodies are often times more successful in identifying NGOs that despite having made a far-reaching impact, lack funds. No doubt, this will give relatively smaller NGOs the opportunity to partner with corporates to undertake impactful, sustainable and results-oriented projects and programmes at the grassroot level.

www.NGOimpact.com is one such innovative portal that is actively attempting to bridge the current gap between Corporates and Indian NGOs by featuring, connecting and matching relevant parties.